Wednesday, 20 April 2016

Looking back for guidance

I was very sorry to read that South Wairarapa farmer Alex Benton has lost the farm that had been in his family for seven generations. Mr. Benton had bought the property off his father, worked hard and was eventually debt free, but an irrigation system incurred inexplicable cost overruns which meant that he eventually found himself nearly $5 million in default. The bank foreclosed, sold the property for $3.5 million and left Benton bankrupt, unemployed and homeless.

I know Mr. Benton. I visited his farm some years ago when I was a regional councillor. At the time I got a shock off one of his electric fences. He good-naturedly blamed my poor quality footwear and during a Wairarapa Committee meeting at the council offices in Masterton he generously presented me with a brand new pair of “Red Band” gumboots.

Mr. Benton is a dairy farmer and the low payouts will have exacerbated his problems. But farming has always been a precarious pursuit. Agricultural businesses are subject to fluctuations in pricing and uncertain weather patterns. Droughts can cause strife to sheep and beef farmers and horticulturists as well as dairy farmers and although the lifestyle may be compelling, the economic risks for all sectors are never too far below the surface.

Surprisingly, there has always been another option.

Four thousand years ago in the Old Testament Moses was given the law that the Hebrews were to live under. God created a cycle of seven years. Every seventh year the land was to lie fallow. Then after seven groups of these seven years - a total of 49 years - the land was to lie fallow two years in a row. In this fiftieth year, which was called the year of Jubilee, not only was the land to lie fallow, but all debts were to be cancelled, all indentured servants set free and all the land reverted back to the original owner.

So there was a natural flushing out of the economy. At the beginning of the fifty year cycle long-term borrowing would be common, but as the cycle began to draw to a close, money would only be available for a few years and then in the forty-ninth year people would only loan money for one year because on the fiftieth year those debts would be cancelled.

This also created a real estate cycle. If you bought some land at the very beginning of the cycle then you could use it for fifty years so it had a high value. However if you bought it forty years into the cycle, the land would be worth much less because you could only use it for ten years before the title went back to the original owner. So of course real estate prices would drop rapidly as the fiftieth year approached.

That economic system kept the Hebrew nation going for over 2000 years. The human race has tried to improve on this system, but with varying success.

Perhaps it’s as well for the Pakeha that the missionaries who came to New Zealand from the other side of the world expounded from the New Testament. Had they preached from the Old, the Maoris might still own all the land.

“Give fools their gold and knaves their power; let fortune’s bubbles rise and fall; who sows a field, or trains a flower, or plants a tree is more than all.” - John Greenleaf Whittier